SUNDAY, SEPTEMBER 5, 1965
THE MICHIGAN DAILY
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H
Steel
Pact
Permits
Growth
ithout
Inflation
By JACK MEYER
President Johnson's eleventh-
hour efforts to avert a nation-
wide steel strike reflected the
basic economic goal of the cur-
rent administration - sustained
growth without inflation.
Sustained economic growth re-
suits from continuously expanding
production. High levels of business
activity insure high levels of em-
ployment. A strike by the steel-
workers would have crippled pro-
duction in the nation's largest in-
dustry, thereby seriously dampen-
ing aggregate production.
The recessionary effects of a
steel strike would have been
heightened by the reverberating
effects of the strike upon other
industries and sectors of the
economy. Automobile production
and similar bulwarks of our pres-
ent prosperity, would be forced to
reduce output and lay off work-
ers.
Other less obvious examples of
industries which would suffer
from a strike can be cited.
A steady supply of steel is the
lifeline of commercial and indus-
trial construction. The produc-
tion of machinery and machine
tools would grind to a halt by a
steel shutdown. ,
In short, the adverse effects of
a steel strike would diffuse
throughout the nation, leaving
many workers of diverse skills
unemployed. An abrupt curtail-
ment of the four-and-one-half
year sustained boom would ensue,
shattering the economic aspira-
tions of the Administration.
The President, however, was not
striving to avoid a strike at any
cost. For he and his economic
advisors are committed to the
maintenance of price stability as
well as economic growth.
Johnson was anxious not only
for a settlement, but for a good
settlement. Unnecessary wage
hikes can be inflationary by put-
ting pressure on employers to
raise their prices in order to main-
tain existing profit levels in the
face of rising labor costs.
The considerations were cer-
tainly in the President's mind as
he exhorted the bargainers to
reach a reasonable agreement.
He did not approach the nego-
tiators unprepared. He was able to
refer the union and industry rep-
resentatives to the wage-price
guideposts that his economic plan-
ners have carefully established as
standards for wage increases.
The guideposts are based on the
productivity of the labor force.
They are effective in avoiding in-
flationary pressures because they
attempt to confine wage increases
to, a level that is commensurate
with productivity gains.
Productivity is measured by out-
put per man hour. As a worker's
productivity rises, he produces
more for his employer in a given
amount of time, thereby cutting
the employer's unit cost. Realizing
this savings, the worker feels jus-
tified in claiming a higher wage.
If wages rise only in proportion
to productivity gains, the em-
ployer's profits are theoretically
unaffected.
If wage hikes exceed produc-)
tivity gains, the employer will be
tempted to raise his price to his
customers to maintain his profits.
Price increases in the steel in-
dustry would probably be trans-
mitted to other sectors of the
economy in both direct and in-
direct fashion:
-Industrialists and builders
who purchase steel would find
their costs going up due to the
higher price of the steel.
-Even non-steel industries
would be tempted to follow the
lead of the steel industry; their
expectations might warn them of
an immanent rise in the cost of
living that would squeeze profits
if they do not raise their price.
If a chain reaction of price in-
creases led to a general inflation,
the damage to our domestic pros-
perity and to our balance of pay-
ments situation could be severe.
As domestic demand is discourag-
ed by higher prices, our growth
rate would falter.
As foreign demand for our ex-
ports drops off, our trade balance
and general payments position
worsens.
The Council of Economic Ad-
visors has set current wage guide-
posts at approximately 3.2 per
cent, although they recognize the
necessity for some. Industry-by-
industry variation. Wage in-
creases that stay within the boun-
daries of these guideposts will be
noninflationary, the Council feels.
Thus, both empirically and
theoretically, the President was
able to portray to both sides of
the dispute the type of settlement
that would be in the national in-
terest.
Papandreou
Immediate
Presses
Greek
"Dominican
or Government
_. Recognized
B52 RAIDS CONTINUE:
South
Viet Forces Strike
CT
v ULUtt
At Guerillas in Swamps
ATHENS, Greece (P) - Ex-
Premier George Papandreou made
a startling offer Saturday for
ending Greece's serious political
crisis. It put heavy pressure on
King Constantine to back down
in their bitter personal struggle.
Papandreou, 77, leader of the
Center Union party, unexpectedly
proposed that the eight-week
crisis be solved by holding im-
mediate elections under the su-
pervision of his political enemies,
the rightist National Radical
Union-ERE.
Panayiotis Canellopoulos, head
of ERE, had suggested such a
solution previously but few
thought it would be accepted. Ca-
nellopoulos, apparently caught by
surprise, hurriedly met with lead-
ers-of his party and then issued
a statement reiterating his ac-
ceptance of such a solution, al-
though many of his lieutenants
are reported to oppose and fear
the idea.
Whether the proposal is carried
out rests entirely with Constan-
tine, who until now has firmly
rejected elections before 1968, re-
gardless of who conducts them.
He repeatedly has stated the
country should wait until the term
of the present Parliament expires
before voting takes place.
The king flew to Corfu Satur-
day to join Queen Anne-Marie
without indicating whether he
would alter this stand in the light
of Papandreou's offer. The pres-
sure on him to do so could prove
hard to resist.
First reaction of Western dip-
lomats who have watched the
deepening crisis was that political
veteran Papandreou had outma-
neuvered Canellopoulos and the
25-year-old king.
Suggestion
They felt Canellopoulos' sug-
gestion that his party form a
government to hold elections, first
presented at a crown council last
Wednesday, had been made in the
almost certain belief it would be
rejected.
It is generally accepted that
Canellopoulos and his rightist fol-
lowers are basically just as op-
posed to elections now as the king.
They fear Papandreou would win
an overwhelming victory which
would be a thinly veiled plebiscite
against the royal family.
A by-product of the crisis has
been almost nightly demonstra-
tions in support of Papandreou,
against the king and, for some
reason against Americans. Most
of the demonstrations have been
organized by leftist organizations.
IJohnson Makes Large
U.S. Aid Commitment
WASHINGTON (A) - President
Johnson announced yesterday U.S.
recognition of the new govern-
ment in Santo Domingo, thus
closing one chapter in the Do-
minican story which began with
a bloody revolt in April.
J'hnson called the next chapter
a "begzinning a new road to peace,
frerdom and hope for the Domini-
can people." To help it on its way
he pledged $20 million in U.S. aid.
Much more American assistance
is planned in the long process of
reconstructing t h e Dominican.
economy.
In the months ahead, negotia-
tions with the new interim regime
of Hector Garcia-Godoy are ex-
pected to lead also to the with-
drawal of the Inter-American
military force. Some 9,400 U.S.
troops and 1,779 Latin Americans
from five countries now make up
t>'^ OAS peace force there.
Tn a statement issued at his
One Sentence
Papandreou's surprising
nouncement came in one
an-
sen-
tence:
"We accept the formation of a
Radical Union (ERE) under the
government from the National
premiership of Mr. Panayiotis
Canellopoulos to conduct elections
within the constitutional limit of
45 days."
At about the same time, the
king was meeting with caretaker
Premier Elias Tsirimokos at the
Texas ranch, Johnson said the
agreement by rival Dominican
factions on a provisional govern-
rhent under Garcia-Godoy 'mark-
ed the end of an impasse which
-Associated Press had brought danger and hardship
.ihto the Dominican people during
PARTY HEAD Pauayiotis Canellopoulos, shown In this 1958 four long and difficult months."
picture, would supervise elections in Greece under a new com- Td rmsdths."
promise move by ex-Premier George Papandreou. The President promised the full
U.S. support to the new regime
palace. Afterward Tsirimokos in- offer simply represented an agree- and called on the OAS to lead in
dicated to reporters that the king ment between two parties, adding the rehabilitation effort.
was aware of Papandreou's state- "I assume the party leaders will Administration sources in Wash-
ment but would make no move in ask to see the king. Let's wait ington gave this analysis of the
the crisis before Monday. and see what happens. It will take Dominican experience:
Tsirimokos said the Papandreou some time yet." 0 Johnson feels he acted as re-
quired in sending in U.S. troops
and that he did not act a moment
too soon.
* Johnson is well aware of the
SAIGON (1P)-South Vietnamese
troops hit the Viet Cong in the
steaming swamps of the Mekong
River delta south of Saigon yes-
terday and U.S. B52 jet bombers
pounded suspected guerrilla posi-
tions in the highlands far to the
north.
In the air war over North Viet
Nam, a U.S. Air Force Phantom
jet crashed after failing to pull
out of a diving attack on a bridge.
The pilot was presumed killed.
Heavy antiaircraft fire was re-
ported in the area.
The eight-engine B52s, flying
from Guam, hit targets in Quang
Tin Province, 320 miles northeast
of Saigon. It was the 18th B52
strike of the war.
No Details
U.S. military spokesmen gave no
further details of the strike, pre-
sumably another saturation bomb-
ing of areas in which the Viet
Cong guerrillas were believed dug
in.
In the jungle swamps of the
Mekong River delta, the govern-
ment force was reported to have
killed 53 Viet Cong.
But elsewhere in the Mekong
area, the guerrillas attacked ar
government outpost 135 miles
south of Saigon, inflicting heavy
casualties. Regional forces event-
ually drove the attackers off.
Government Force
A government force ranging
around Vinh Binh Province 75
miles southwest of Saigon cap-
tured 24 guerrillas Friday in a
battle that was launched Thurs-
day at the mouth of the. Bassac
River, 25 miles west of the pro-
vincial capital of Phu Vinh.
U.S. officials listed as missing a.
U.S. Air Force pilot whose plane
was brought down by North Viet-
namese gunners Thursday 100
miles west of Hanoi.
In Saturday's raids on the
North, U.S. planes hammered at
warehouse areas, bridges and
trucks. Two U.S. B57 jet bombers
-Associated Press
AFTER A CLASH with the Viet Cong yesterday on Tan Dinh
Island, South Vietnamese soldiers march by the body of another
South Vietnamese slain in the fighting.
WORLD NEWS ROUNDUP:
Schweitzer in Coma, Death Approaching
By The Associated Press
LAMBARENE, Gabon-Dr. Al-
bert Schweitzer lapsed into a coma
again yesterday in the hospital
he built for Africans on the jungle
banks of the Ogooue River. A
message sent aboard to relatives
and close friends said: "He is dy-
ing."
"There is no more hope of hu-
man effort that can save him,"
said his daughter, Rhena Schweit-
zer Eckert.
PITTSBURGH, Pa. - Steel
union officials meet here today to
vote on a contract agreement that
would hike steelworkers' income
almost 50 cents an hour over three
years. Swift approval is expected.
The optimism stems from the
firmness of President Johnson's
announcement Friday that nego-
tiators "have reached essential
agreement." Also, a union source
indicated no difficulty is expect-
ed; and approval by the ten maj-
or steel companies is expected to
be merely a formality.
*' * .
NATCHEZ, Miss. - Mississippi
National Guardsmen assigned to
prevent racial rioting planned yes-
terday to remain in Natchez
through the Labor Day weekend.
The city remained calm. A boy-
cott called by Charles Evers, state
field director of the National As-
sociation for the Advancement of
Colored People was the only move
pressed by civil rights forces.
* ,. *
KUCHING-British and Malay-
sian forces have stepped up ground
,and air patrols in Malaysian
Borneo after a rash of Indonesian
guerrillas hit-and-run raids, mil-
itary sources in Kuching said yes-
terday.
At least 32 Indonesian raiders
and two British Gurkha troops
were killed and another two Gur-
khas were wounded in the four
raids.
* * *
BOMBAY - Religious r io t s
swept the west Indian city of
Poona for the fourth day yester-
day.
Hindus tried to burn down a po-
lice outpost and four other burn-
ing incidents were reported in the
anti-Moslem rioting. Police ar-
rested about 40 Hindus. The out-
breaks were far less severe than
on Friday, when two persons were
killed, scores injured and 1,938
persons arrested.
* * *
KODIAK, Alaska - A sharp,
rolling earthquake shook this
south-central Alaska fishing town
early yesterday, but apparently
caused little if any damage.
The earth tremor was felt over
a wide area of south-central
Alaska including Anchorage, bad-
ly damaged in the quake last year.
JOHNSON CITY, Tex.-Presi-
dent Johnson announced yester-
day he will name diplomat William
J. Porter as deputy ambassador
to South Viet Nam. Porter is the
hand-picked choice of Ambassa-
dor Henry Cabot Lodge.
cost in American lives and funds.
There were 26 U.S. servicemen
killed and 155 wounded, so far.
The new Dominican provisional
government ran into its first po-
tentially serious problem Satur-
day as opposition to civilian dis-
armament developed in the rebel
quarter.
Rebel leaders indicated they
would oppose the collection of
weapons from civilians unless pro-
visional President Garcia-Godoy
dismisses certain military leaders,
chief among them Gen. Elias Wes-
siny Wessin, commander of the
armed forces training center.
attacked a fiery complex with five
tons of bombs 85 miles southeast
of Vinh. The planes drew light
ground fire but both were said to
have returned safely.
* Forty other U.S. Air Force jets
roamed the skies over the North
in 10 different missions to hit
targets of opportunity.
U.S. air action in South Viet
Nam included strikes against troop
positions, rest and supply areas
and base camps.
There were these developments
abroad:
t W. Averell Harriman, U.S.
ambassador at large, told newsmen
in Helsinki, Finland, the Soviet
Union is coneerhed about the
Vietnamese war and -wants a
peaceful solution. Harriman had
private talks with Soviet leaders
in Moscow in July.
*Communist C h i n a again
warned Britain on what Peking
calls the movement of U.S. mill-
tary planes and ships through
Hong Kong en route to South
Viet Nam. Hong Kong is a British
colony.
"""""""
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ALL THIS AND
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THIS SUNDAY
10:30 a.m. "LIFE"
5:45 p.m. "IMPACT" (with supper)
7:00 p.m. "WHAT CAN I BELIEVE?"
calvin malefyt, speaking
university reformed church
at East Huron and Fletcher
loves students
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